Restate the net cash flows in Table 6.6 in real terms. Discount the restated cash flows at a real discount rate. Assume a 20 percent nominal rate and 10 percent expected inflation. NPV should be unchanged at +3,802, or $3,802,000.

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Period 2 523 12,887 7,729 1,210 262 1. Sales* 2. Cost of goods sold 3. Other costs* 4. Tax 5. Cash flow from operations (1 – 2 - 3 - 4) 6. Change in working capital 7. Capital investment and disposal 8. Net cash flow (5 + 6 + 7) 9. Present value at 20% 32,610 48,901 19,552 29,345 1,331 35,834 19,717 21,492 11,830 1,611 837 2,200 4,000 -1,400 -1,580 1,464 1,772 1,939 3,432 5,929 4,053 682 8,678 1,307 4,176 -682 1,581 2,002 -2,600 -934 3,686 8,295 12,163 -1,972 -1,629 -550 -739 - 10,000 - 12,600 - 12,600 -1,237 1,949* 5,757 3,269 912 2,947 6,323 10,534 9,985 4,013 -1,484 5,080 3,659 2,047 1,928 Net present value - +3,802 (sum of 9)